As a Broker Associate, I represented my Client at the San Jose, California, Home Auction last Saturday, December 13, 2008. What a great learning experience and event! There were over 2,000 people there bidding on homes that were previously valued from $90,000 to $1,200,000 and sold from $40,000 to $750,000. Yes, there were bargains; and, yes, there were investors and first time buyers participating. Prior to the auction, we completed a Home Inspection on the properties so that we knew approximately what the costs were to restore the property, if needed...no surprises! If my Client had been successful, I would have earned 1% commission. Since my Client wasn't successful, I earned credibility and loyalty for the next purchase. What has your experience been with home auctions?
Auctions can be good news or bad news -- some good bargains - bu ta bit risky for some buyers who do not do their homework.
Auctions can be a good way to unload property quickly, but if you are a seller, be prepared for low ball offers. Auction buyers are looking for bargains and in my experience don't pay near what the property is worth if it were sold on the open market.
Maybe things are different now or in your area, but at the auctions I have been to, there have been few "bargains." I have been to the auctions that say "Buy a house for as little as $1", but have yet to see any house go for that. As you mention, there are a million other people there expecting to get a bargain too, bidding against you, which means you are very unlikely to get a house for what you expect to pay, as your client obviosly found out. Properties are sold as is as well, which can obviously turn into a nightmare, even if the place is inspected. Sellers rarely make any kind of legal disclosures on auction properties, so there could be hidden hazards not redily found during an inspection, but that may become costly later. One should also be aware of what kind of deed the seller is going to provide. I have seen problems with that as well, clouds on the title, liens, etc. I am not saying there is never a bargain to be had, but given the pitfalls, I personally would rather find a bargain elsewhere.
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